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Reserve managers battling low returns face tough choices

OMFIF’s Global Public Investor has been exploring the investment trends in central bank reserve management for 11 editions now, using our valued network of reserve managers globally to build a robust view of how $15tn of total international reserves are likely to be deployed across financial markets. This year, we surveyed 73 central banks with $5.4tn in international reserve assets.

The results of the 2024 survey reveal some fundamental shifts in the reserve manager community but also little consensus on how they plan to approach markets in the future.

Reserve managers think inflation is slowly coming under control. Nearly all survey respondents (94%) expect the rate of inflation to be between 2% and 4% in major economies over the next two years. This is in stark contrast to last year when more than half (52%) anticipated inflation to be above 4%. But the battle is not over yet: 80% listed it as one of the top three factors impacting their investment approaches over the next 12-24 months.

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Key findings:

  • 73 central banks with $5.4tn in international reserves responded to the survey, 171 central banks are analysed and ranked by reserve assets in the back tables
  • Close to 80% of reserve managers expect equilibrium real interest rates to be higher relative to pre-pandemic levels
  • Around 30% are looking to increase their investments in government bonds and quasi-government bonds, and a quarter (24%) are looking to increase holdings of corporate bonds
  • Nearly 30% expect to increase their dollar holdings in the next 12-24 months, more than any other currency
  • Net demand for renminbi has slipped to just 2% this year, compared to 12% in 2023 and over 30% in 2022
  • 40% anticipate investing more in green bonds in the next two years

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